City Research Online

Abstract

Shipping companies face the trilemma of investing in cheaper but more polluting conventional vessels, in more expensive but eco-friendly ones or postponing their investment. We quantify the price premium paid for eco-friendly vessels and investigate its determinants. The results indicate that eco vessels trade at an average premium of 25% compared to their conventional counterparts, while the corresponding income premia are between 9% and 15%. Our findings further suggest that the price premium depends on the market conditions, with income premia, past price premia, and fleet supply being strong drivers, while fuel costs and market liquidity have a less important effect. The magnitude and significance of these drivers vary based on the market state and segment. Overall, the paper documents the adverse effect that the current technological and regulatory uncertainty has on vessel investment and highlights the need for further policy intervention to reduce market uncertainty and encourage green investment.

Publication Type:	Article
Additional Information:	© 2024. This manuscript version is made available under the CC-BY-NC-ND 4.0 license https://creativecommons.org/licenses/by-nc-nd/4.0/
Publisher Keywords:	Asset Pricing, Sustainable Shipping, Maritime Decarbonisation, Vessel Prices, Net Zero Shipping, Price Premium
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HE Transportation and Communications H Social Sciences > HG Finance V Naval Science > VM Naval architecture. Shipbuilding. Marine engineering
Departments:	Bayes Business School Bayes Business School > Finance
SWORD Depositor:	Symplectic Administrator

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